Analysts at Berenberg initiated coverage on discount retailer B&M at ‘buy’ on Tuesday, stating that the group had been and appeared set to remain a “Covid-19 beneficiary”.
Berenberg said it believes B&M will be a post-Covid-19 winner, offering one of the strongest top-line growth and return on invested capital profiles in European retail, while its cash-generative business should also support additional capital returns.
“We believe the recent share price pullback has provided an attractive entry point into a structural winner,” said Berenberg, which issued the stock with a 600.0p target price.
On the German bank’s estimates, B&M trades on a 15.6x 2022 price-to-earnings ratio, something it branded “a justified premium to UK and European retail peers” given its superior ROIC and scope for additional capital returns.
Berenberg also stated market share and customer gains would support B&M’s growth step-up, with consensus estimates expecting the group to deliver roughly 21% like-for-like growth in 2021.
The analysts acknowledged this creates “a challenging comparable”, but they also believe the growth step-up can be sustained, supported by four growth drivers – the outperformance of the value retail market, market share gains from underperforming value retail peers, incremental customer gains and space growth providing roughly 5-6% growth per annum.
